NAIROBI, Kenya — Delays in adopting the electronic government procurement system, mounting pending bills and rising public debt undermined Kenya’s execution of the national budget in the financial year ended June 2026, the Controller of Budget has reported.
The Controller also flagged increased reliance on Article 223 of the Constitution to access funds outside the approved budget, delays in implementing the Equalisation Fund and weaknesses in year-end accounting as major constraints to effective budget execution.
Weaknesses in project planning also affected implementation, including inadequate provision for ongoing contractual obligations and the commencement of projects without approved budgets.
The report further cited weak reporting on development-partner projects involving Appropriations-in-Aid, failure to use the Public Investment Management System to manage projects and inadequate budgeting for expenses such as utility relocation and land acquisition.
Public Debt Climbs To Sh13.01 Trillion
The findings come against a backdrop of tightening fiscal conditions, with Kenya’s public debt rising to Sh13.01 trillion by June 30, 2026, from Sh11.80 trillion a year earlier.
The 10 per cent increase pushed public debt to 68.5 per cent of GDP, above the 55 per cent threshold approved by Parliament.
The rising debt stock also increased the cost of servicing government obligations.
Kenya spent Sh1.77 trillion on public debt during the financial year, up from Sh1.59 trillion in 2024/25.
Interest payments on domestic debt rose to Sh759.20 billion, compared with Sh678.25 billion a year earlier, while principal repayments on external debt increased from Sh332.67 billion to Sh504.35 billion.
Pending Bills Hit Sh475.53 Billion
Trade payables stood at Sh475.53 billion at the end of June, highlighting continued pressure from unpaid government obligations.
State corporations, state-owned enterprises and semi-autonomous government agencies accounted for Sh365.63 billion, or about 77 per cent of the total.
Ministries, departments and agencies accounted for the remaining Sh109.90 billion.
The Controller of Budget recommended that verified pending bills be settled on a first-in, first-out basis and that adequate funds be provided for them in the 2026/27 budget and the medium-term expenditure framework.
Revenue Collection Improves
Despite the implementation challenges, the national government recorded stronger revenue collection during the year.
Receipts into the Consolidated Fund reached Sh4.61 trillion, representing 94 per cent of the annual net target.
This was an improvement from Sh3.99 trillion, or 75 per cent of the target, collected in 2024/25.
Tax revenue accounted for Sh2.45 trillion, representing 53 per cent of total receipts and 99.7 per cent of the annual target.
The government issued Sh4.58 trillion from the Consolidated Fund to ministries, departments and agencies, Consolidated Fund Services and county governments, equivalent to 93 per cent of revised net estimates of Sh4.92 trillion.
Budget Absorption Falls
Overall national government expenditure reached Sh4.75 trillion, representing 90 per cent of the revised gross budget of Sh5.27 trillion.
This marked a decline in the overall absorption rate from 94 per cent in the previous financial year.
Development expenditure amounted to Sh809.47 billion, with an absorption rate of 91 per cent, while recurrent expenditure stood at Sh1.96 trillion, representing 96 per cent absorption.
Consolidated Fund Services expenditure reached Sh1.98 trillion, with an absorption rate of 85 per cent.
Controller Calls For Tighter Fiscal Management
The Controller of Budget called for stronger adherence to public finance laws governing Article 223 spending, which allows government to authorise expenditure for urgent and unforeseen circumstances.
The office said tighter controls were necessary to improve the credibility and predictability of the national budget.
It also urged the National Treasury to accelerate fiscal consolidation, reduce the fiscal deficit and strengthen domestic revenue mobilisation.
